Conference Agenda

The energy transition demands innovative technologies and infrastructure to achieve carbon neutrality. Due to hard-to-abate emissions and the challenge of securing sufficient renewable energy, many industries must adopt carbon capture and storage (CCS). CCS is essential for mitigating climate change by capturing and permanently storing CO2 emissions that cannot be otherwise eliminated. Herein, a critical aspect of CCS is developing pipeline infrastructure, which efficiently connects CO2 sources to storage sites, offering substantial economies of scale. Efficient pipeline networks are crucial as they maximize the economic benefits and require close collaboration among competing firms, which is often challenging in competitive markets. While system-wide planning for CO2 pipelines has been extensively studied, there is a need for more research on the roles of individual stakeholders.

Building on our established systemic optimization framework, which accurately models pipeline layouts, we introduce a novel game-theoretic approach to plan CO2 pipeline networks on a national scale. We conceptualize this problem setting as both a strategic game and a cooperative, cost-sharing game. We also demonstrate these models by applying them on a case study of the German cement and lime industry. Herein, the analyses illustrate the trade-offs in strategic versus cooperative scenarios. In the cooperative model, we also examine the power imbalance between larger companies, which operate multiple plants and hold greater market share, and smaller, independent producers or groups.

We develop a policy game between a regulator and two firms operating in a duopoly, where one firm unilaterally commits to a more environmentally or socially friendly technology to trigger tougher regulation. The other firm has a competitive disadvantage under the new technology regulation and may preempt the threat of future public policy by investing in a hybrid approach, partially using the new technology. We incorporate asymmetric information by assuming that the firms have private information about the true costs of the new technology, unlike the welfare maximizing regulator who only prefers to regulate under low costs. In our dynamic real option game model, investment decisions serve as signals of private cost information to the regulator. Overcompliance of firms with a competitive advantage in the cleaner technology is a signaling for tougher regulation. This signaling incentive distorts timing decisions in the duopoly. If the difference in low and high costs is significant, the advantaged firm must speed up investment to reinforce truthful signaling. The disadvantaged firm tries to preempt its competitor's signal by investing in a hybrid approach, aiming to generate enough welfare to dissuade public action by the regulator. Our model also provides insights into the impact of asymmetric information and the cost structure of old and new technologies on the policy game.